(1) In accordance with the quarterly distribution schedule established in 20-9-310(4)(a), MCA, the Office of Public Instruction shall allocate the excess oil and natural gas production taxes to school districts directly impacted by oil and natural gas production in the following manner:

(a) 50% to school districts in Zone 1;

(b) 37.5% to school districts in Zone 2; and

(c) 12.5% to school districts in Zone 3.

(2) The Office of Public Instruction will distribute the revenues allocated to operating school districts in Zone 1 as follows:

(a) 5% for efforts to recruit and retain qualified educators and staff;

(b) 60% for the daily operations of school districts that have not yet reached the limit on the amount of oil and natural gas production taxes that a district may retain under 20-9-310, MCA; and

(c) 35% for infrastructure projects in school districts that have applied for and been granted funds under this program.

(3) The funding in (2)(a) will be distributed quarterly to individual school districts based on the number of quality educators in the district compared to the total number of quality educators in the school districts in Zone 1.

(a) The district may expend funds received under (2)(a) for recruitment efforts, moving expenses, hiring bonuses, travel, student loan repayment, housing, or other initiatives to recruit and retain qualified staff.

(b) All school districts in Zone 1 will receive a distribution under (2)(a) regardless of whether the district has reached the maximum amount of oil and natural gas production taxes that it may retain under 20-9-310, MCA.

(c) The number of quality educators for a district will be the same number that is used for the distribution of the quality educator payment for the current school year.

(4) The funding for daily operations in (2)(b) will be distributed quarterly to individual school districts based on the number of quality educators in the district compared to the number of quality educators in the school districts in Zone 1.

(a) A district is eligible for funding for daily operations under (2)(b) until the district reaches the maximum amount of oil and natural gas production taxes that it may retain under 20-9-310, MCA.

(b) Once a district receives the maximum amount of oil and natural gas production taxes it may retain under 20-9-310, MCA, additional allocations during the school year will be distributed among the remaining districts that have not reached their maximum amount.

(c) The number of quality educators for a district will be the same number that is used for the distribution of the quality educator payment for the current school year.

(5) The funding for infrastructure in (2)(c) will be distributed through an annual grant process.

(a) All school districts in Zone 1 are eligible to apply individually or in conjunction with other school districts in Zone 1.

(b) Priority will be given to school districts with urgent and serious public health and safety issues, deferred maintenance, and proposals to enhance educational opportunities. The applicant will describe:

(i) the challenges facing the district in terms of student demographics, school environment, student achievement, human resources and instruction, facilities and resources and/or economic resources as a result of oil and natural gas production; and

(ii) how the proposal addresses the challenges faced by the district.

(c) A school district must deposit the infrastructure grant monies into the miscellaneous program fund.

(d) Grant funds awarded to a school district under this section do not count against the maximum amount of oil and natural gas production taxes that it may retain under 20-9-310, MCA.

(6) A nine-member committee composed of one representative from each of the seven counties in Zone 1, a representative from the Office of Public Instruction, and a representative from the Office of Budget and Program Planning (OBPP) will determine which projects are funded.

(a) Committee members will be appointed by April 1 of each year.

(b) The president of the northeast region of the Montana Association of School Superintendents will appoint the committee members from Richland, Roosevelt, Sheridan, and Wibaux counties and report the names of committee members to the Office of Public Instruction.

(c) The president of the southeast region of the Montana Association of School Superintendents will appoint the committee members from Carter, Dawson, and Fallon counties and report the names of committee members to the Office of Public Instruction.

(d) The Superintendent of Public Instruction will appoint the committee member from the Office of Public Instruction.

(e) The director of the OBPP will appoint the representative from OBPP.

(f) The committee will elect a chairperson at its first meeting.

(g) The committee will develop by-laws and a process and timeline for evaluating grant applications.

(7) Grant applications will be submitted to the Office of Public Instruction on an annual basis.

(a) The OPI will make the application format available no later than January 15. The application window will be at least 90 days.

(b) The Office of Public Instruction will distribute the submitted applications to committee members and convene the first meeting of the committee. The chairperson of the committee will convene subsequent meetings.

(c) The committee will award the grants by June 1. The OPI will distribute the funding for the current school year to the grantees by June 30.

(8) The Office of Public Instruction will distribute quarterly the revenues allocated to school districts in Zone 2 and Zone 3 in the following manner:

(a) There is a school unit payment to each school district based upon the calculated number of school units within the school district.

(b) Each operating school district must receive a payment for at least one school unit.

(c) A district with current year ANB greater than the applicable number described in ARM 10.11.101(4) must receive an additional unit or units, which is calculated by dividing the current year ANB by the appropriate number of ANB in ARM 10.11.101(4) and rounding that number up to the nearest tenth.

(d) The Office of Public Instruction will determine the amount of excess oil and natural gas production taxes allocated to each operating district in Zones 2 and 3 as follows:

(i) determine the school unit payment by dividing the amount of revenue available for distribution in the zone by the number of school units for the operating school districts in the zone; and

(ii) multiply the number of school units for an operating district by the school unit payment to determine the amount to be distributed to the district.

(9) Except as provided in (5)(d), a school district must deposit any excess oil and natural gas production taxes received by the district in a budgeted fund of the district and record the revenue as oil and natural gas production taxes. The monies may be used in accordance with the purpose of the fund into which the monies are deposited.